Report: China Retracted Commitment to End US IP Theft, Forced Technology Transfers

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Before U.S. President Donald Trump announced new 25% tariffs on virtually all goods imported from China on Sunday, the Chinese government was planning to backtrack on all of its previously made commitments to the U.S. government, according to a Reuters report today.

China First to Backtrack On Previous Trade Commitments

According to U.S. government and private sector sources, China was already planning on backtracking on some important commitments it had previously made to the U.S. government before arriving for the new trade negotiations with the U.S. government. The diplomatic cable from China arrived in the U.S. on Friday with many edits to the 150-page draft trade agreement that would have eliminated all the trade progress the two countries made since last year.

China had previously committed to ending U.S. IP theft, as well as ending the practice of forcing technology transfers on U.S. companies that want to do business in China via mandatory 50-50 joint ventures or through other means.

China Would Continue IP Theft, Forced Tech Transfers

According to Reuters’ sources, China has made reversals to its previous commitments in each of the seven chapters of the trade agreement, and it seems it's no longer willing to resolve the complaints over which the U.S. government started the trade war in the first place.

These complaints include: preventing intellectual property and trade secrets theft, ending of forced technology transfer for U.S. companies that want to do business in China, improvements to competition policy, access to financial services and an ending to currency manipulation.

President Trump tweeted on Sunday that he would raise the tariffs on $200 billion worth of goods (including electronics) to 25% from the current 10% and may add the 25% tariffs to an additional $325 billion worth of goods.

All of this, plus the already existing 25% tariff on another $50 billion worth of goods means that almost all of the $540 billion worth of goods being imported from China will have a 25% tariff imposed on them, as soon as this Friday, when the new tariffs will go into effect.

Lucian Armasu
Lucian Armasu
Lucian Armasu is a Contributing Writer for Tom's Hardware US. He covers software news and the issues surrounding privacy and security.
9 Comments Comment from the forums
  • JamesSneed
    The US needs to get the IP theft under control but at the same time these tariffs which are paid by the importers and passed on to American consumers are not going help. If we are going to place tariffs on items we should have a plan to move production of those items back to the US otherwise China knows it's a bluff.
    Reply
  • thegriff
    JamesSneed said:
    The US needs to get the IP theft under control but at the same time these tariffs which are paid by the importers and passed on to American consumers are not going help. If we are going to place tariffs on items we should have a plan to move production of those items back to the US otherwise China knows it's a bluff.
    But, the only option becomes Tariffs, the theft of IP and forced joint ventures (same as theft) are intolerable. They have had tariffs on our goods for years, same with Japan and Europe and then they complain when we do the same thing.
    Reply
  • alextheblue
    thegriff said:
    But, the only option becomes Tariffs, the theft of IP and forced joint ventures (same as theft) are intolerable. They have had tariffs on our goods for years, same with Japan and Europe and then they complain when we do the same thing.
    Exactly. They tax the hell out of American goods whenever a domestic competitor (copycat using stolen tech, mostly) exists. All we've seen in the past decade or so is LIP SERVICE. They'd wring their hands and then do nothing, as politicians and short-sighted executives alike were too busy lining their own pockets. China has almost single-handedly driven domestic production to a shadow of its former self, and they have practically written the book on dumping. Tariffs are far from ideal, but we're short on leverage and we should have done something DECADES ago. We waited too long and now a lot of the tools we have are all but useless. Even now they spit in our face and backpedal on their commitments to stop IP theft and blatant forced technology transfer. That doesn't even count all the backdoors and spying efforts. People need to open their eyes and look at China's meteoric rise over the past few decades. That has come largely at our expense, and yes they used our own greed and lack of foresight against us. They are playing the long game, they always have. But we can't change the past. We're either suffer now or we'll suffer tenfold later. They'll overtake us in terms of economic power, better to do something now than to wait until we are weaker and have even less industry.
    Reply
  • coolitic
    I find it kind of funny that China tried to appear like they actually cared about the IP theft in the first place.
    Reply
  • bit_user
    alextheblue said:
    All we've seen in the past decade or so is LIP SERVICE. They'd wring their hands and then do nothing,
    That's really not true. All of the things that should've been tried first, were. Many cases have been brought to trade court and we've even had bilateral negotiations that people seem to forget.

    The problem is that China would do things like export through 3rd countries, to get around trade court rulings, and has a bad track record of honoring commitments secured in bilateral negotiations.

    Clearly, more needed to have been done, and with more urgency. I think we can agree on that much.

    alextheblue said:
    short-sighted executives alike were too busy lining their own pockets.
    Not all short-sightedness. China has a way of playing rope-a-dope, where they dangle the carrot of their growing domestic market in front of foreign companies and give them just enough of a taste to keep them interested and chasing after longer-term growth. However, as you said, once China has developed its own domestic competition, then the tariff and non-tariff barriers come into force. So, whether people engaged with China for short-term gains or long-term ambitions, China could usually tilt the tables to come out ahead.

    The biggest error was really in thinking that China would follow the model of other developing and developed countries and play by the rules of the current economic order. China clearly had other ideas.

    alextheblue said:
    China has almost single-handedly driven domestic production to a shadow of its former self,
    China certainly didn't invent off-shoring of labor from US factories. It's a long-term trend that's been going on since at least the 1970's - long before China attained favored-nation status, in the WTO.

    ...not to excuse them or their anti-competitive practices, but we can't realistically put all of the sins and downsides of globalization on them.

    alextheblue said:
    Tariffs are far from ideal, but we're short on leverage and we should have done something DECADES ago. We waited too long and now a lot of the tools we have are all but useless.
    Actually, the biggest hammer we could wield would've been to form a multi-lateral coalition with other developed countries - who are basically all in the same boat as us. Don't forget that the EU's economy is even bigger than the US. If we got together with them, S. Korea, Japan, Canada, Australia, etc. we'd have way more negotiating power than what Trump is playing with. But, he doesn't believe in multilateralism, always preferring to go it alone.

    This also plays into the Belt & Road situation, where you can't dissuade countries from joining unless you give them an alternative. Well, we had (part of) an alternative, if an imperfect one, in the form of TPP. There were certainly things not to like about it, but rather than improve it, we just walked away from it, leaving China to have pretty much the only game in town.

    The old phrase "leader of the free world" was a testament to how much sway the US had over world affairs. Except, as we alienate friends and allies I see that influencer status quickly receding into the past, and China knows it. They need the US market, but less than ever before. By going in without any allies, Trump has raised the stakes for the US, and lowered the stakes for China. Bad move.
    Reply
  • alextheblue
    bit_user said:
    China certainly didn't invent off-shoring of labor from US factories. It's a long-term trend that's been going on since at least the 1970's - long before China attained favored-nation status, in the WTO.
    I wasn't referring primarily to domestic firms outsourcing. More so talking about purely Chinese ventures (often government, uh, "partnerships") selling goods so cheaply that domestic production is eradicated. Domestic companies are then pushed to outsource, or risk collapse. They may outsource and die anyway, as a result of Chinese owned ventures still having lower overhead, less taxes, and a willingness to break even for as long as it takes. The end result is much the same regardless. Some industries are easier to break into than others, though.

    bit_user said:
    This also plays into the Belt & Road situation, where you can't dissuade countries from joining unless you give them an alternative. Well, we had (part of) an alternative, if an imperfect one, in the form of TPP. There were certainly things not to like about it, but rather than improve it, we just walked away from it, leaving China to have pretty much the only game in town.
    TPP was bad enough it became a hot coal. It also didn't help with China's dealings in most of the world, but that's another issue I suppose. But it didn't just vanish... they ended up with the CPTPP. Not sure that it has really helped then a whole lot, and even the current CPTPP doesn't include Korea, or several other vital nations. Trump has said he'd be open to rejoining the CPTPP if they were willing to negotiate a better deal. None of it matters though if you leave the door open for China to shift goods via deals with neighboring nations.
    Reply
  • bit_user
    alextheblue said:
    More so talking about purely Chinese ventures (often government, uh, "partnerships") selling goods so cheaply that domestic production is eradicated. Domestic companies are then pushed to outsource, or risk collapse. They may outsource and die anyway, as a result of Chinese owned ventures still having lower overhead, less taxes, and a willingness to break even for as long as it takes. The end result is much the same regardless. Some industries are easier to break into than others, though.
    No disagreement, here.

    alextheblue said:
    TPP was bad enough it became a hot coal. ... Trump has said he'd be open to rejoining the CPTPP if they were willing to negotiate a better deal.
    A lot of people disliked it, for various reasons. The business community wasn't one of them. Fact is, the US actually stood to gain the most from it, since most of the other signatories' markets had various tariff and other barriers to US products, yet our markets were already open to them. I had my own issues with it, but those were really on principled grounds, rather than commercial. For Trump to say this is all down to commercial concerns sounds like he's really not concerned with the reasons so many people didn't like it. He slammed the door shut on it about as firmly as he ever does.

    If you haven't noticed, he doesn't like any sort of partnerships, coalitions, or anything multilateral. Even to the point of undermining NATO and the WTO, where he's blocking the appointment of new judges, in spite of the overwhelming track record that trade courts have, finding in favor of the US. He has a misplaced faith in his own prowess at negotiation and he overestimates the clout of the US.

    alextheblue said:
    But it didn't just vanish... they ended up with the CPTPP. Not sure that it has really helped then a whole lot
    Well, it's not worth a whole lot, in its current degraded form.

    alextheblue said:
    It also didn't help with China's dealings in most of the world, but that's another issue I suppose.
    Here's an interesting thought experiment. If you're a developing country, you need infrastructure and access to foreign markets, and only China is knocking on your door - what do you do? You might be suspicious of China's long-term objectives, but you have more immediate concerns and no real alternatives.

    That's why we needed strong trading blocks and to step up foreign infrastructure investment (e.g. through World Bank, etc.) - to give countries a plausible alternative to China. Without that, China has been establishing captive markets, buying up ports, and tying up supply chains. It's like China is playing chess or Go, while Trump is out back playing rock-paper-scissors. He literally has no answer to Belt & Road. It's now even got a toe-hold in Greece and Italy!

    And likewise, when it comes to dealing directly with China on issues like IP protection and market access, why wouldn't you want to go in with all the other developed countries, who have virtually the same interests and grievances as we do? China might be able to weather a trade war with the US, but they certainly couldn't with the rest of the developed world. He's being reckless - no two ways about it. I give him credit for taking more political risks than most politicians would, but then why wouldn't you want every advantage you can get, when the stakes are so high?

    I'm not just being rhetorical, here. Think about it - how would you tip the balance more in favor of the US? How would you try to counter China's global ambitions?
    Reply
  • alextheblue
    bit_user said:
    Well, it's not worth a whole lot, in its current degraded form.
    Degraded how? Because it doesn't include the US which already has open trade with these nations? They don't even need a multi-nation trade agreement to improve trade relations with us, if they wanted to. TPP isn't and won't do much by itself, and if they really want us (or various other nations who ALSO didn't sign) involved they certainly can modify the agreement to please more parties.

    bit_user said:
    That's why we needed strong trading blocks and to step up foreign infrastructure investment (e.g. through World Bank, etc.) - to give countries a plausible alternative to China. Without that, China has been establishing captive markets, buying up ports, and tying up supply chains. It's like China is playing chess or Go, while Trump is out back playing rock-paper-scissors. He literally has no answer to Belt & Road. It's now even got a toe-hold in Greece and Italy!
    Most of the nations I was concerned with should fall under the auspices of the EU or our closest Asian allies in the first place. Yet here we are, discussing how the US might come in and mop up. But in this case I don't know that we have the willpower to do anything. The bottom line is China doesn't just "invest" or provide aid, which often buys you little power past the short term. The Chinese on the other hand? They buy. They control. They even own businesses and property in the west (using our own openness against us). The Chinese don't share our delicate sensibilities, they don't have any issues with imperialism or closed markets. We are rather squeamish by comparison. Most in the West wouldn't like to hear the answer to the question of "How do we stand toe-to-toe with Chinese ambitions?"
    Reply
  • bit_user
    alextheblue said:
    Degraded how? Because it doesn't include the US which already has open trade with these nations? They don't even need a multi-nation trade agreement to improve trade relations with us, if they wanted to. TPP isn't and won't do much by itself, and if they really want us (or various other nations who ALSO didn't sign) involved they certainly can modify the agreement to please more parties.
    I don't agree with this. First, trading blocks benefit from a network effect, where the value increases with more participants. Second, a lot of the original signatories had closed markets which would now be open to all participants. Without that, they have no alternative but to make nice with China. And the issue for the US was never that it didn't advantage us enough - why do you think a Republican-led congress gave Obama fast-track authority on it?

    TPP basically became a stand-in for everything that anyone didn't like about globalization. Trump killed it because it had become unpopular and because he overestimates his ability to make bi-lateral deals - not because it didn't provide advantage to the US.

    The other thing you're overlooking is how long trade deals take to negotiate. It's not like any country can just come along and strike up a trade deal with the US. They have to get in line. And remember that the EU and Japan are still waiting their turn. So, everyone else is probably going to be waiting well into the 2020's. Meanwhile, China is steamrolling along...

    alextheblue said:
    Most of the nations I was concerned with should fall under the auspices of the EU or our closest Asian allies in the first place.
    Well, Belt & Road seems mainly targeted at the developing world, which also comprises most of the fastest growing markets. I don't quite follow who you're talking about and why.

    alextheblue said:
    Yet here we are, discussing how the US might come in and mop up.
    No, we're not. Or, at least I'm not. I'm talking about US access to markets and raw materials - things squarely in US national interests, which also happen to be in the national interests of most of our traditional allies and trading partners. There ought to be enough collective will to form some answer to Belt & Road, but the developed world has been driven to distraction while China is eating our lunch.
    Reply